President Trump’s Tax Reform to Drive Stock Market Higher

President Trump’s Tax Reform to Drive Stock Market Higher

President Trump’s Tax Reform to Drive Stock Market Higher

$DIA, $SPY, $QQQ, $VXX

 The biggest reform of the US tax system in more than 30 years won final approval by lawmakers Wednesday, we expect it to drive a continuing rally in technology issues that has driven Wall Street to record highs this year.

The Trump White House chief economic adviser Gary Cohn said Wednesday that the stock market’s Trump Rally has more more scope to move higher.

“I don’t think a lot of the tax reform is priced in the stock market,” Mr. Cohn said in a interview.

“If you look at what the tax plan is going to do, I don’t think it is factored in,” he argued. “So I think there is a lot more momentum in the stock market.”

The Republican-controlled US House of Representatives gave final approval to President Trump’s sweeping tax bill which will be the largest overhaul of the US tax code in 30 years. The Senate has already voted in favor of the bill.

Mr. Cohn, formerly the # 2 executive at Goldman Sachs (NYSE:GS), noted the stock market’s P/E (price-to-earnings) multiple isn’t that expensive relative to the economy’s fundamentals.

“The stock market is reflecting the reality of what’s going in the business environment today,” said Cohn, director of the National Economic Council. “There is going to be a continuation [of the] rally in the equity markets based on real underlying fundamentals of the US economy … as well as companies having more earnings power because of lower tax rates.”

Mr. Cohn predicted companies will invest more in their business and hire more workers as a result of the tax reform bill.

Notably: AT&T (NYSE:T) will give more than 200,000 US workers a special $1,000 bonus to celebrate the signing of the tax-cut bill. The payment will go to union-represented, non-management and front-line management employees, AT&T said in a statement. The telecom giant, a supporter of the Republican-backed tax legislation approved in Congress Wednesday, reiterated its plan to invest an additional $1-B in the US next year.

The proposed changes include cutting the corporate tax rate to 21% from 35% beginning on 1 January 2018, which could boost company earnings and pave the way for higher dividends and stock buybacks.

The S&P 500 has climbed about 4.7% since mid-November when the House passed the bill, led by a rally in sectors transport, banks, energy and others that are expected to benefit the most from lower taxes.

Some market analysts say the market has already priced in the approval of the tax bill, Shayne and I do not believe it is yet.

Wednesday, the major US stock market indexes finished at: DJIA -28.10 at 24726.65, NAS Comp -2.89 at 6960.96, S&P 500 -2.22at 2679.25

Volume: Trade on the NYSE came in at: 777-M/shares exchanged

  • NAS Comp +29.3% YTD
  • DJIA +25.1% YTD
  • S&P 500 +19.7% YTD
  • Russell 2000 +13.5% YTD
HeffX-LTN Analysis for DIA: Overall Short Intermediate Long
Very Bullish (0.66) Very Bullish (0.56) Very Bullish (0.83) Very Bullish (0.58)
HeffX-LTN Analysis for SPY: Overall Short Intermediate Long
Very Bullish (0.61) Very Bullish (0.67) Very Bullish (0.58) Very Bullish (0.58)
HeffX-LTN Analysis for QQQ: Overall Short Intermediate Long
Very Bullish (0.50) Bullish (0.33) Very Bullish (0.52) Very Bullish (0.64)
HeffX-LTN Analysis for VXX: Overall Short Intermediate Long
Bearish (-0.45) Bearish (-0.49) Very Bearish (-0.57) Bearish (-0.29)

Stay tuned…

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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